Applied Optoelectronics (AAOI) 47th Annual Raymond James Institutional Investor Conference summary

Company overview and market focus

• Operates primarily in the data center and cable TV markets, with data center products accounting for about two-thirds of business.

• Manufactures optical equipment, specifically fiber optic adapters, to interconnect switches and servers in data centers.

• Major customers include large hyperscale data center operators and cable operators like Charter.

• Growth areas are data center and cable, with legacy business in fiber to the home and telecommunications.

Data center technology evolution and industry trends

• Pioneered purpose-built data center transceivers in 2012, shifting from copper to optical solutions as data centers grew.

• AI and large language models are driving demand for higher-speed interconnections, with 800G and above for compute infrastructure and 400G for front-end applications.

• Industry is supply-constrained, especially in laser diode manufacturing, leading to long-term agreements with hyperscale customers.

• Transitioning to silicon photonics for future products, requiring high-power, narrow linewidth lasers.

Capacity expansion and supply chain strategy

• Plans to ramp 800G and 1.6T production capacity from 100,000 units to 200,000 by mid-2026 and 500,000 by mid-2027.

• Automated manufacturing enables rapid scaling and flexibility in production location, with increasing focus on U.S.-based production.

• U.S. production is only 10-15% more expensive than Asia, but is valued for supply chain security by customers.

• Most new capacity will shift from Taiwan to the U.S. by 2027, especially for 800G and 1.6T products.